NEW YORK ( TheStreet) -- Nothing unites like a common enemy--a premise that may give solace to "Too Big To Fail" U.S. banks that, according to U.S. security officials cited in The New York Times Wednesday, are victims of cyber-attacks carried out by the Iranian government.
In just the last four months, Iran carried out cyber-attacks on Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), U.S. Bancorp (USB), PNC Financial (PNC), Capital One Financial (COF), Fifth Third Bank (FITB), BB&T (BBT) and HSBC (HBC), the report states, noting that the U.S. officials, who aren't identified, "have not offered any technical evidence to back up their claims." The attackers have used data networks or "clouds," of the type run by Amazon (AMZN) and Google (GOOG) as well as a host of smaller companies, the report states.
This explains why Sullivan & Cromwell senior chairman Rodgin Cohen, one of the top bank M&A attorneys in the U.S., was uncharacteristically talking about cyber-security in an interview with Bloomberg News this week.
Cohen happened to be in the midst of an interview at Bloomberg's studios at the same time President Obama was announcing his nominations of Chuck Hagel and John Brennan for Defense Secretary and CIA director. The super-lawyer was asked, merely as an aside, if these nominations have anything to do with the banking industry."They actually do," Cohen responded. "I was delighted that the president singled out--I think first--cyber-security, because we've already seen the invasions of the banks a few months ago and this is a very serious issue for the country but particularly for the banking industry." Since the 2008 subprime crisis, Cohen has devoted many of his public statements to defending the big banks--not from Iranian cyber-terrorists, but from American citizens, politicians, and an increasing number of regulators and even industry officials who think they should be broken up. "Almost all small banks do great things for their communities, but this political philosophy is counter to the reality of 20th and 21st century business, which is that in a global economy you need to have major global institutions," Cohen told me when I interviewed him in April. Bank analyst Richard Bove has frequently made a similar argument, though one that is more explicit about the threat the U.S. faces if it breaks up its banks. Bove has pointed to the fact that Europe is willing to tolerate banks that are even larger than those in the U.S.. He argues that if the U.S. is intent on breaking up its banks, it will soon see the global banking industry dominated by banks from other countries. Indeed, this survey from Global Finance magazine of the world's 50 largest banks shows JPMorgan Chase (JPM) and Bank of America at numbers nine and 10 respectively, behind six European banks, Industrial and Commercial Bank of China, and Japan's Mitsubishi UFJ Financial Group. Nonetheless, the argument that America needs giant banks to compete on the global stage hasn't put an end to calls to break up the U.S. banks. It is possible this cyber-threat from Iran, assuming that is really where it comes from, will soften critics of the U.S. banking industry. On the other hand, it could be argued a less-centralized system of smaller banks would be less vulnerable to attack than our current one, dominated by a few Goliaths. But then perhaps this is all part of an evil plot by Iran to divide and conquer the U.S. banks. Whichever the case, at least the debate over Too Big To Fail has gotten a bit more interesting. -- Written by Dan Freed in New York. Follow @dan_freed
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